Reuters: Regulatory News: UPDATE 1-UK fines UBS $15 mln for failings in AIG fund sale

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UPDATE 1-UK fines UBS $15 mln for failings in AIG fund sale Feb 12th 2013, 11:15 Tue Feb 12, 2013 6:15am EST LONDON Feb 12 (Reuters) - UBS has been fined 9.45 million pounds ($14.80 million) by Britain's financial regulator for exposing customers to unacceptable risk when it sold an AIG investment fund in the latest blow to the Swiss bank's battered reputation. The Financial Services Authority (FSA) said on Tuesday the bank, which was fined $1.5 billion in December for its part in a global interest rate rigging scandal a year after stunning markets with a $2.3 billion rogue-trading loss, also failed to deal properly with customer complaints about the AIG fund sale. The FSA said UBS sold the AIG Enhanced Variable Rate Fund - which sought to improve returns by investing in assets backed by securities and floating rate notes -- to almost 2,000 high net worth customers between Dec. 1, 2003 and Sept. 15, 2008. Initial investments were about 3.5 billion pounds. But as share prices plunged during the credit crisis of 2007 and 2008, customers rushed to withdraw cash and the fund was suspended, leaving 565 UBS clients unable to access about 816 million pounds invested. The FSA said UBS had mis-sold the fund to at least 19 customers and had mishandled at least 11 complaints. It estimates that the bill for compensating customers will come to around 10 million pounds. "UBS's conduct fell far short of what its customers deserved and what the FSA requires," said Tracey McDermott, head of the FSA's enforcement and financial crime division. "It failed to ensure it understood the product it was selling, failed to recommend it to the right customers and failed to take effective action in the financial crisis when the problems with the fund came to the fore." Link this Share this Digg this Email Reprints

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